Newly-issued bonds from Chinese firm Lumena Resources were quoted below their offer price but traders said no deals had been done as investors remained edgy about risky assets amid weak regional stock markets. In the broader market, the Asia ex-Japan iTraxx investment-grade index widened 4 bps to 105/109 from the previous day, tracking losses in the equities markets, traders said.
Chemical maker Lumena Resources sold $250 million of five-year notes on Wednesday at 99.085 cents on the dollar, or 991.1 basis points (bps) over comparable US Treasuries, in line with earlier guidance. But the notes, rated BB-minus by Standard & Poor's, were not traded in Asia on Thursday, reflecting the market's apprehension over risky assets, traders said. The bonds were quoted at 97/99 cents. Lumena's debt was the second new issue this week to weaken on debut in Asia. On Wednesday, State Bank of India's bond also fell on its first trading day.
Previous new issues such as Singapore's Temasek Holdings, Indonesia's Adaro and South Korea's state-run Korea Expressway were well-received on their debuts. "The size is so small and the market is not keen on this name," a Hong Kong-based trader said, referring to Lumena's issue. The issue was twice oversubscribed, a source said. Of the total debt sold, investors from the United States bought 41 percent, Europe 33 percent and Asia 26 percent.
By investor type, fund managers and hedge funds accounted for 70 percent of total purchases, banks, 15 percent, retail investors, 12 percent and insurers, 3 percent, the source said. Nomura said there are key downside risks on Lumena, such as operating in a niche market with uncertain demand prospects.
"That said, we would be cautious on the name in view of the concerns highlighted above and think that the pricing does not justify the risks associated with the debt," Nomura said in a note on Thursday. State Bank of India's five-year global bond, sold on Tuesday, also succumbed to profit taking, traders said.
The debt was quoted at 232 bps over US Treasuries, versus 227/229 on Wednesday. The debt was sold at 226.4 bps. "The epicentre of the current anxiety is the US, what happened overnight in the US," said Tim Condon, ING Bank's head of Asia research in Singapore.
Philippine bonds remained under selling pressure, as some traders expect Manila to issue global bonds as early as in January to fund the 2010 budget deficit. The Philippines' 6.375 percent debt due in 2034 sold last week, was quoted at 99.125/99.50 cents on the dollar, down from 99.50/99.625 on Wednesday, Manila-based traders said.
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